Moody's assigns B2 rating to Vedanta's proposed senior unsecured notes

Moody's Investors Service Thursday assigned B2 rating to Vedanta's proposed senior unsecured notes and said the outlook was negative.

B2 is a speculative grade rating and is subject to high credit risk.

"Moody's has assigned a B2 rating to the proposed senior unsecured notes guaranteed by Vedanta Resources and issued by its wholly-owned subsidiary, Vedanta Resources Finance II Plc.

"The proposed notes will rank pari-passu to Vedanta's existing senior unsecured notes, and are rated at B2, two notches below the Ba3 corporate family rating (CFR). The rating outlook is negative," Moody's said.

Vedanta's Ba3 CFR is supported by the company's large-scale and diversified, low-cost integrated operations, with strong market positions across the broad suite of its product offerings, spanning oil and gas, base metals and energy assets.

 

The CFR also incorporates the group's complex shareholding structure and the company's exposure to inherently volatile commodity prices that pressure earnings.

Furthermore, large capital spending and dividends will limit free cash flow generation and keep borrowings and debt/EBITDA leverage elevated.

"Vedanta's proposed issuance constitutes a proactive step in refinancing its amortising term debt maturities with a long-term bond with bullet repayment and further reducing its cost of debt," Kaustubh Chaubal, a Moody's Vice President and Senior Credit Officer said.

For the proposed bond, Moody's expects Vedanta's refinancing risk at the holding company to abate until June 2021, Chaubal said.

The proceeds from the issuance will be used towards repaying Vedanta's existing debt, meeting its working capital and interest servicing liabilities and in providing operational support to subsidiaries.